Honda not to make ultra-cheap car

AGENCIESFeb 27, 2008, 02.30pm IST

TOKYO: Honda Motor is staying out of the race to develop ultra-cheap cars, hoping motorists in fast-growing markets like India will pay more for safer, greener vehicles, its president said on Wednesday.

Tata last month unveiled a $2,500 car, the world's cheapest, which is set to hit the roads there by October. French-Japanese partners Renault and Nissan aim to launch a similarly priced vehicle by 2010.

"Honda will not make cars at such a low price," said Takeo Fukui, president and chief executive of Japan's second-largest automaker.

"I don't think our Indian customers buy cars that are cheaper but at the same time poor in quality," he told a press conference.

Tata says its new "Nano" cars are safe, affordable and meet emission requirements in India and abroad.

But environmentalists fear they will jam up India's already clogged roads even further and add to choking pollution.

Analysts said the era of ultra-cheap cars will spur the creation of a vast new market segment in India, a nation of 1.1 billion people, where the auto sector is already booming amid rapid economic growth.

"In India, there will be competition between motorcycles and four-wheel vehicles, because India is a hot country and motorcycles don't need to use air-conditioners," said Fukui.

"As for four-wheel vehicles, the battle will be tough," he added. Japanese automakers are increasingly looking to fast-growing emerging economies to drive their growth amid sluggish domestic sales.

Asian countries including India account for 80 per cent of Honda's motorcycle sales.

The Honda boss said that his group had not changed its global strategy significantly in response to growing worries about the health of the US and world economies.

"Even though we see declines in sales in Florida and California, our sales on the East Coast and in the Midwest are hitting record highs," he said.

Honda, a pioneer of environmentally friendly motoring, sees hybrid vehicles accounting for one-tenth of its global sales by 2010.